Loan securitisation volume rebounds over 50% in March

That compares with the pre-pandemic volume of ₹1.9 lakh crore seen in FY19 and FY20.

A raft of tailwinds propped the securitisation volume. Most non-banking financial companies reported an upturn in business activity, which led to improved borrower cash flows and collection efficiencies, CRISIL Ratings said, adding that there has been a negligible impact on collections in the wake of the omicron wave.

Disbursements also picked up, necessitating incremental funding requirements. More than 130 financing entities securitised their assets in the past 12 months. Investors such as mutual funds and foreign-owned financing entities, which were chary in the recent past, picked up such securitised instruments.

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“The upturn in business activity, stable collection ratios, increasing disbursements, more entities securitising assets, and the return of investors such as mutual funds are indicative of the economy rebounding,” said Krishnan Sitaraman, senior director, CRISIL Ratings. “Based on fourth- quarter data, it would be safe to surmise that India’s securitisation market is coming out of the pandemic- induced stupor.”

The last quarter of fiscal 2022 also saw a number of mortgage-backed deals comprising pools of non-retail loans with higher ticket sizes. The conventional retail mortgage-backed securitisation (MBS) segment accounted for 40% of the overall volume.

Within asset-backed securitisation (ABS), commercial vehicle (CV; 25%), gold (10%) and two-wheeler (2%) loans remained important asset segments. In addition, microfinance loans drew traction, comprising 10% of volume, especially in the last quarter of fiscal 2022, amid indications of resilience among low-ticket size borrowers.

The proportion of pass-through certificate (PTC) issuances rose from 37% in fiscal 2021 to 38% in fiscal 2022, while the direct assignment (DA) route continued to record higher volumes, accounting for as much as 62% of the retail assets securitised. Nearly four-fifths of the investments were by public and private sector banks, with NBFCs also playing a role in acquiring assets from other finance companies.

“While the threat of an immediate disruption to business is low, resumption of business under normalised economic activity will likely be a priority for financing entities,” said Rohit Inamdar, senior director, CRISIL Ratings.